McAllister: Govt Should Review Implementation of New Excise Policy

Chris McAllister is the Managing Director, British American Tobacco Nigeria and West Africa. He spoke to journalists on the company’s commitment to the Nigerian economy and issues affecting the tobacco industry. Goddy Egene presents the excerpts:

Your company, British American Tobacco Nigeria (BATN), has been able to weather the storm in your over 100 years of doing business in Nigeria. What makes you resilient and continue to invest in the country?
Yes, that is right. We are a longstanding company that is ‘Proudly Nigerian’. We are deeply committed to the country. We recognise that there will be both good times and bad times. But over the long term, with the right government policies, the potential of Nigeria is enormous.

The World Bank forecasts that by 2050, Nigeria will be the 3rd most populous country in the World. It is already the largest economy in Africa. From the turn of the millennium to 2014, annual gross domestic product (GDP) growth was close to 10 per cent (and we expect a return to these levels over the medium term). Nigeria is a vibrant, entrepreneurial country with a rapidly expanding middle class. It is this combination of potential and real tangible signs of development that gives BAT Nigeria the confidence to continue to invest in our state-of-the art factory in Ibadan and our recently commissioned West African headquarters in Lagos.

What are your views on the present signs of economic recovery?
The current signs of economic recovery are very encouraging. The stability of the exchange rate and the return of consumer purchasing power is leading to a strong recovery in our domestic Nigerian business. Simultaneously our export business is going from strength to strength. We are now the second largest non-oil exporter in Nigeria exporting to 14 different countries. We are now investing in new machinery and recruit more skilled labourers to meet the growing demand.

We are excited to be playing our part in the development and diversification of the Nigerian economy though industrialisation and exports. The current government has made a good start on economic reform with its published industrial strategy, commitment to infrastructure and pro-business ‘ease of doing business’ strategy. I would just urge the administration to be bolder, faster and more ambitious in its leadership of the development agenda.

What are your views on the government’s recent increase on excise duties in your sector?
The excise hike, which comes into force in June, is undoubtedly painful for the industry and for consumers alike. Notwithstanding, we recognize the need for the government to urgently invest in physical infrastructure in the interests of broader social development. Consequently, we stand ready to play our role as part of a wider initiative to extend and deepen the tax base. However, we would urge the government to periodically review the implementation of its new excise policy to evaluate whether it is achieving the anticipated revenue targets and that the legal industry is not being substantially undermined by illicit traders.

It is worth reflecting that prior to BAT’s investment in a new local factory in 2003, Nigeria was flooded by non-duty paid, unregulated cigarettes to the tune of more than 80% of the market. As a consequence, the Nigerian Tobacco Company (NTC), the forerunner of BATN, was driven into effective bankruptcy. More recently, Sierra Leone imposed a large increase in excise and in less than two years, illegal traders have returned to dominate the market. The country has suffered a sharp drop in excise revenue and is failing to achieve its stated public health objectives.

We will continue to advocate that there should be collaboration and consultation between all relevant stakeholders for tax policies to be balanced and reasonable, reducing the potential for unintended consequences on both the economy and wider government objectives.

Recent trend shows that there is a growth in the use of e-cigarettes as a healthier alternative. As a market leader, what is BATN doing about it?

Most organisations are constantly exploring new offerings for consumers and BATN is no exception. We are fully aware of the health risks from smoking and are actively investing in products which have the potential to reduce harm. One notable example is the emerging technology of e-cigarettes which produce vaporised nicotine without the harmful side effects from tobacco smoke. We will be launching our world leading range of e-cigarettes in Nigeria in the near future.

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